Few artists draw as well as Percy Kelly did. It's said he learned to hold a pencil before he could walk. His style is inimitable yet hard to define. He's a bit like Lowry without people (he almost never drew human figures), or a bit like Hockney without California (the furthest he ever went was Brittany). Comparisons might be made with other artists from the Lake District – Sheila Fell, for example, a near-contemporary of his. But a better analogy might be with the douanier Rousseau, not just because both worked in clerical positions for the state (in Kelly's case for the Post Office, from 1934 to 1958) but because both liked to say that nature was their only teacher. Kelly was no primitive: the seeming simplicity of his paintings of empty roads, lonely houses, drystone walls and bare fells is deceptive. But he didn't go to art school till his 40s, wasn't part of a group and had minimal dealings with the art world. He died a virtual recluse.

It all might have been so different. There was a moment at the end of the 1960s when fame seemed ready to embrace him. His Cumbrian hills and Cornish harbours were suddenly in demand. Rich patrons took him up. Princess Margaret was among his admirers and Katherine Whitehorn mentioned him in an Observer article praising working-class artists. An exhibition in his home town of Workington was followed by shows in London and Kings Lynn, with several galleries eager to represent him. But Kelly was so difficult – paranoid, narcissistic, hypochondriac, self-destructive – that the moment of opportunity passed. It was to be 40 years before his work was shown in London again.

The biggest problem was his refusal to sell his work. He had only five exhibitions in his lifetime, and NFS (Not for Sale) items dominated them. When the London dealer Andras Kalman drove up to the Lakes determined to buy 20 drawings, Kelly sent him home empty-handed. "They are so important to me I could never sell them," he wrote, adding, with typical arrogance: "When they see the light of day they will diminish any drawings of this era." Though he lived in penury, his attitude didn't soften as time passed. Collectors would arrive in hope and depart in dismay. Sometimes he'd relent, shake hands on a deal, then change his mind. "I still posses ALL my early work and probably the BEST drawings and paintings," he told a friend towards the end of his life. He would rather starve than let things go, he said. Worldly success didn't interest him. His target was bigger: immortality.

With posthumous recognition in mind, he squirrelled many of his paintings away. Neither his ex-wife Audrey nor the benefits agency were allowed to know how big his oeuvre was and how much it might fetch. Despite the clutter surrounding him during the last decade of his life in a Norfolk cottage, he was canny about keeping his work safe. His son Brian inherited most of it; other friends and relatives had also been given paintings and drawings. Then there were the illustrated letters he'd sent to his friend Joan David over 10 years – as beautiful in their way as Blake's illustrations to Songs of Innocence and Experience, even though the words can be humdrum. The way in which several caches of Kelly's work have come to light since his death in 1993 makes a fascinating little story in itself. A show of previously unseen work opens next week and there's a new biography by Chris Wadsworth, which recounts the progress of an extraordinary life.

Not the least remarkable aspect of it was that a man who once played football for Workington AFC under the management of Bill Shankly became a woman. Born Robert Percy and known by many as Bob, Kelly changed his name by deed poll to Roberta Penelope in 1985 and spent as much of his last eight years as he could in women's clothes. The cross-dressing had begun many years before; his first marriage ended when his wife Audrey came home one evening to find him wearing her grey Jaeger knitted dress. Horrified, she threw him out.

In truth, the marriage had been in trouble from the start; Audrey thought she was getting a white-collared, football-playing breadwinner, not a neurotic, workshy artist, and she let him know how disappointed she was. Dressing up in her clothes forced the issue and ended their mutual unhappiness. But it also answered a deeper need in Kelly. "I cannot stand the male species," he complained; "I find them quite pitiful. They have brought me so much misery." His only reason for not having a sex-change operation, apart from the cost, was that he thought it superfluous. "I now feel I am a woman first and not the other way around."

This may have been self-delusion – despite the dresses, and the HRT treatment that helped him grow breasts, he still looked like a man – but it did have an impact on his art. His early work, as Percy or Bob, exudes a fascination with machinery and light industry – factories, cranes, bridges, cars, boats. As Roberta, the emphasis becomes more domestic and decorative. There are some lovely flower paintings – of harebells and poppies – as well as a couple of self-portraits: Roberta in a green coat, Roberta with a red skirt and red hat. Since much of Kelly's work is undated, it's risky to make categorical statements about his development. But the evidence suggests that late on in life, while delighting in his femininity ("I tied a blue cotton square with a pretty white design around my neck which went perfectly with dark white-spotted headscarf"), he attempted things he hadn't done before. "Bring the human figure into your work," his tutors at art school in Carlisle had urged him, and now, years later he did, albeit sparingly and with himself as the subject.

He exulted in colour too. This was a sore point with Kelly. At his first solo exhibition, when he was 48, he was enraged to hear people complaining "Such a pity there isn't more colour." At the time he was mostly working in charcoal, black and white etchings, and watercolour and ink. "Anyhow I'm a sad person and feel b/w," he said, quoting Coleridge on the beauty of steely rain, bare wintry trees and ragged, dirty snow. Many Kelly landscapes come in soft ochre and muted green: "It is how I see the fells." But he wasn't averse to richer colour: his street and harbour scenes are sometimes lifted by a perky red sun coming up, and his letters to his stepdaughter Kim are a riot of yellows, greens and blues. In another letter, to his friend Joan, he recalls how he bought his first paints at 16 with the proceeds of his first pay packet – and illustrates this with a painting of an open paintbox.

Averse to criticism as he was, and convinced of his own greatness ("My talent is often too much for me"), Kelly frequently alienated people, not least those who were trying to help. In childhood, as a twin in a working-class family of seven children, he'd been given special treatment and continued to demand it throughout his life, especially from women. While married to Audrey he carried on a secret correspondence with a girl 25 years his junior. And after his marriage to Audrey broke up, he moved to Wales with a doctor's wife, Chris, the mother of three children, a relationship which lasted 10 years before she finally ran out of patience. Earlier he'd enjoyed friendships with Helen Sutherland, patron of the Pitmen Painters, and with the poet Norman Nicholson.

The men he served with during the war found Kelly's eccentricity and indiscipline hard to take, despite his prowess at sport. But he did have one surprising admirer: as a soldier, he briefly worked under Whitehall, next to the Cabinet War Rooms, and during an air raid Winston Churchill sat beside him, chatted, congratulated him on his draughtsmanship and suggested he visit the National Gallery. Though 22 by then, Kelly had never been to an art gallery before and what he saw in London – not just Constable, Gainsborough and Renoir, but Graham Sutherland, Henry Moore and Stanley Spencer – left its mark.

He remained stubbornly himself, however, sticking to the landscapes he knew best and, despite domestic chaos, emotional upheaval and periods of depression, painting or sketching nearly every day. "Drawing is as natural as walking," he said. "A piece of charcoal or chalk is like an extension of my forefinger." Much of his work is still emerging. Perhaps more about the life will emerge too. But there's enough already to show what a marvellous, iconoclastic talent he was. He may have been two people – Bob and Roberta – but Percy Kelly was a one-off.

• Chris Wadsworth's The Man Who Couldn't Stop Drawing is published by Studio Publications (£35).